The Trend Was Actually An Aberration
A report from the Virginia Pilot. “More than five times as many homes are for sale in Hampton Roads now as were on the market during the heady days of the real estate boom in 2004, and the excess inventory is showing no sign of shrinking anytime soon. ‘The calls - they’ve just stopped coming in,’ said Bob Bristol, a Chesapeake mortgage broker who described the market today as ‘the slowest I’ve ever seen’ in 15 years in the business.”
“In September 2005, Sean Kentch paid $538,000 for a five-bedroom, 3,800-square-foot brick home near the intersection of Mount Pleasant Road and Centerville Turnpike. Late last year, he learned he would soon be reassigned. This fall, he put the house up for sale, asking $579,000. He didn’t get a single offer.”
“Finally, Kentch decided to rent it instead. Within a week, he had a tenant, though the rental income will cover only about two-thirds of the $3,000-plus-a-month mortgage.”
“Between February and mid-October of this year, 13 of the 15 homes sold in Kentch’s subdivision went for less than the assessed value; all but two of the 15 homes were sold by builders, according to city real estate records.”
“Bill Dore, a Hampton Roads housing market analyst, said the run-up in home values between 2003 and 2006 led many to see what they wanted to see. ‘We got sloppy,’ he said. ‘We took those three years as a trend, instead of an aberration.’”
“The ‘trend,’ however, was actually a market blip driven by the notion that land for development was disappearing rapidly, along with available housing, Dore said.”
The Baltimore Sun from Maryland. “The mortgage crisis roiling communities across the country is being acutely felt in Prince George’s County, where thousands of residents, many lured in recent years by relatively affordable real estate prices, are in danger of losing their homes.”
“Stephen Fuller, an economist at George Mason University, attributes the crisis in Prince George’s to several factors, including the general affordability of the county’s housing stock.”
“‘You think of that as a strength, but it also attracted buyers who were marginally financially capable of supporting the mortgage,’ Fuller said.”
“Compounding the problem was a construction boom in the county where, unlike other areas in the Washington region, vast tracts of land had remained largely undeveloped, Fuller said. ‘They just couldn’t stop it,’ Fuller said of construction there.”
“Samuel Moore was a D.C. renter when he started looking for a home in 2006. A real estate agent suggested a four-bedroom house in the Prince George’s town of Clinton, and he paid $283,000 for the house that November.”
“Within weeks, he said, the ceiling in the dining room caved in, pipes burst and the toilet in the main bathroom crumbled. After spending his entire savings on repairs, Moore said, he could no longer afford the house. ‘It turned into a money pit,’ he said.”
“He put the home on the market early last year, and so far, four potential buyers have expressed interest to his real estate agent. But he said none qualified for a mortgage. Moore said he has not been able to find a renter and will not be able to make this month’s payment.”
“‘I thought I had enough foresight’ to avoid buying a house with so many problems, he said. ‘I wind up exhausting all of my savings.’”
The Philadelphia Inquirer from Pennsylvania. “Without a doubt, fewer people are purchasing houses now than were a year ago. Houses for sale are abundant, and prices tend to drop the longer a place goes unclaimed. Time on the market is increasing both in this region and nationwide.”
“‘The big problem in the current housing market is gridlock,’ said economist Joel Naroff. ‘Most move-up buyers look to the equity they have in their current house to buy a new one, so they don’t believe they can make an offer without selling that present house.’”
“That’s the predicament Robin and Joe Finkelstein find themselves in.”
“‘We’ve been talking about moving to the Philadelphia area [from the Washington suburbs] to be closer to Joe’s job in the Poconos,’ Robin Finkelstein said. ‘But we have the smallest townhouse in a community where a lot of bigger ones are for sale and have been on the market for a long time.’”
The Pocono Record from Pennsylvania. “Monroe County’s record-high 2007 home foreclosure rate may not be a surprise to informed observers, but it still can shock the senses.”
“There were 1,253 foreclosure filings with the county Prothonotary’s Office, according to final figures released by Prothonotary George Warden. The previous all-time high, set in 2003, was 941.”
“Warden’s office records foreclosure filings but doesn’t track the causes. ‘I think it’s the subprime market,’ Warden said. ‘The price of gas, perhaps. People aren’t able to commute and work.’”
“What Warden does know is the 2007 foreclosure filings are more than double the 540 recorded in 2005. There were 835 foreclosure filings in 2006.”
The Ithaca Journal from New York. “With relatively low prices for houses, a stable housing market and steady employment, Ithaca hasn’t experienced the real estate crash some places have.”
“‘People talk about the real estate bubble bursting, but in Tompkins County the bubble never really got that big to begin with,’ said Elia Kacapyr, economist and Ithaca College professor.”
“Brokers tell stories of some houses in the Fall Creek neighborhood and other neighborhoods near downtown Ithaca having as many as nine offers two years ago.”
“Homes in Ithaca were selling so fast and prices rising enough that buyers were moving to outlying towns, according to both broker Steve Saggese, and Everett Boutillet, a mortgage officer. Prices and taxes were so high, people were moving to towns like Groton, bringing prices up there as well, Saggese said.”
“Depending on whom you ask, after several years of bidding wars on desirable property and bids exceeding asking prices, Ithaca is changing to a buyer’s — or at least an even — market.”
“‘It is definitely becoming a buyer’s market here. There are more houses on the market, fewer multiple bids and especially in the higher end of the market, where it generally starts,’ said Beth Carlson Ganem, an associate broker who specializes in higher-priced homes.”
“Buying a house on Ithaca’s West Hill recently, Kenton Hensley and his family first had to face selling in an overstocked, depressed suburb west of Boston. ‘A month and a half after we managed to sell our house, there was an article about the slow pace in the Boston Globe, and they used our town as an example,’ Hensley said.”
“The town they left, Southborough, 25 miles from Boston, and others nearby had a lot of houses sitting on the market, he said.”
The Boston Herald from Massachusetts. “Some of Greater Boston’s most exclusive residential enclaves are seeing a startling spike in foreclosure activity.” “Wellesley, Weston, Sudbury and Newton in MetroWest, one of the nation’s wealthiest suburban clusters, all saw big increases last year in foreclosure filings, statistics from the Warren Group show.”
“Even the wealthiest communities are not immune to the trends that have fueled a nationwide foreclosure epidemic. ‘I don’t think this is just a low-income problem,’ said Robert Pulster, head of a Boston nonprofit that counsels foreclosure victims.”
“Wellesley foreclosure filings more than doubled last year through October - to 30 - from just 13 during the same period in 2006. Sudbury had one of the largest increases of any MetroWest town. Foreclosure filings soared 145 percent, from 11 in 2006 to 27 last year.”
“Meanwhile, more condo owners are also falling behind on their mortgages in downtown Boston, home to some of the priciest condo towers in the country, the Boston-based data firm reports.”
“In downtown Boston, which covers pricey neighborhoods like the South End, Back Bay and Beacon Hill, foreclosure filings rose 25 percent in 2007 to a total of 74.”
“Some of the foreclosure activity in these well-off towns and neighborhoods may stem from home owners who stretched to buy during the run-up in real estate prices back in 2004 and 2005, said Alan Pasnik, Warren Group’s real estate analyst.”
“That likely led those buyers to make the same mistakes as many others now facing the loss of their homes, such as taking out variable rate loans that later reset to much higher rates, even as home values have fallen, Pasnik said.”
“‘It’s a smaller percentage of the (overall) community, but it is the same ugly story, over and over again,’ he said.”
The Providence Journal from Rhode Island. “According to the city clerk’s office, the number of properties taken back by banks in Pawtucket has almost tripled, rising from 65 in 2006 to 172 last year.”
“Peg Ramos, the clerk responsible for recording real estate transactions, said foreclosures used to be so rare — there were just 3 in 2004 and 17 in 2005 — that she would have to look up how to enter them in city records.”
“Now they are so common the task has become second-nature. ‘I’m getting three or four a day,’ she said.”
“In an effort to trim the deficit, the city administration has imposed a freeze on expenditures. In addition to property taxes that haven’t been paid because of foreclosures, the city is projecting a $125,000 drop in the amount of money it collects in real estate transfer taxes and a $200,000 drop in real estate recording fees.”
“Tax revenues have plunged because banks that foreclose on delinquent borrowers don’t have to pay taxes on the foreclosed property until it is sold to another buyer, Finance Director Ronald L. Wunschel said in an interview.”
“To prevent the reserve fund shrinking further, city officials are being extra careful about spending. ‘Every expenditure that comes across, we look at it and we challenge it,’ Wunschel said.”
“It doesn’t matter if an item has been included in the budget. It is still being scrutinized, Wunschel said. Employees who have gotten budgetary approval for such things as a new computer or new set of tires on their city-owned vehicle are being asked whether they can put off the purchase until next year.”
“‘Do you really need four new tires on that vehicle?’ Wunschel said. ‘Can you get by with two?’”
“Hiring practically stalled in December, driving the nation’s unemployment rate up to a two-year high of 5 percent and fanning fears of a recession. Employers last month added the fewest new jobs to their payrolls in more than four years, according to the employment report released Friday by the Labor Department. The report showed that employment conditions are deteriorating, strained by a housing slump and credit crunch that are sapping economic strength.”
If you thought it was hard to carry a 600k starter home on a 50k a year salary, see how hard it is with $0 income. The propoganda team can no longer deny recession is imminent. As noted before, MacMansions in 2010 will be converted into boarding homes as so many Victorians did in the past. History always repeats and brings us back to norms.
Can’t wait to see job numbers after holiday jobs are lost. Next month should be interesting.
“‘Do you really need four new tires on that vehicle?’ Wunschel said. ‘Can you get by with two?’”
About a million more of these decisions, and our consumer economy tanks in a heartbeat.
I made a new Year’s resolution this year that I would not worry about what the housing market was going to do. With further indicators that the “R” word is going to become a reality, I think that resolution will be fairly easy to keep.
I’m now totally in the mindset of how far and long prices will fall and am more than happy to watch for a few years. Quite rewarding.
I thought the media said corporate America will take up the slack when the consumer runs out of steam?
LOL
“The propoganda team can no longer deny recession is imminent.”
Ummm. You spoke too soon. Everything is peachy and the market will recover by mid year! These people are delusional….
http://www.cnbc.com/id/22504387
I really don’t see much difference between our corporate propaganda and the propaganda put out by the Soviet Union in the 1980’s.
Both tried to prop up their economies with lies. It’s all one big confidence game.
this hack called for increases in 05-06 and 07
o for 3
“Stephen Fuller, an economist at George Mason University
From May 2007:
John McClain, senior fellow at the George Mason Center for Regional Analysis, predicted 15-20% gains (PDF file) (p. 29) in 2006 in Prince William and Prince George’s Counties.
I love the dolts at George Mason U. They make even Snaith in Florida look restrained by comparison. Clearly it’s an affirmative action program there at the distinguished Center, where they hire psychotics, call them economists, then turn them loose to rant and rave.
These foundations are nothing but outsourced Chamber of Commerce functions, designed to confer a veneer of respectability via the University name, and of course, to generate income for the school.
But you all know this already, sorry. The problem is that reporters use them as sources, thanks to the thyroid medication handed out in University PR departments.
George Mason Univ. has been traditionally associated with right-wing conservatives, and it’s Center for Media & Public Affairs is funded in large part by the Schaife family with the mandate to portray the American press as liberal and out of touch with American values. This translates into bashing any MSM that reports facts.
I’m assuming he was just using this as an example to point out how stupid it is to assume appreciation will continue. GMU is a not a top school, but you would think they would know there has to be a link between income and home prices although this got lost during the days in which having an income stream was not relevant in the bank’s decision to make a 100% LTV mortgage loan.
The funny thing is that actually have a very good economics program. They had two Nobel Lauriates on their staff - although I believe one left.
I think that Fuller was just looking out for those who pay him. He said “if current trends continue” but never really stated that he predicted the current trends to continue. That a clever way make it appear that you’re making a prediction when you aren’t really doing that. You can count on the media to be stupid enough to present it as a prediction and when it turns out absurd you point to the fact that you were only making a factual statement (if trends continue then xxx is a fact) and never actually made a prediction.
But, of course, it’s also a good way to make yourself look like a fool….
I’ve pointed out a thousand times that Fuller’s “Center for Regional Analysis” is a builder-industry funded organization. He is a paid cheerleader, not an “economist.”
Given Bernanke’s inflationary monetary policies, Fuller may be right on this one. However, the median income in the DC area will be somewhere around $4 million per year to support his “average” $14 million house. What an A-hole.
Oh, and in 2057, a five pound bag of sugar will cost $300 and a new pair of Levi’s $1,200.
Yep, these “real estate” centers located on campuses all over the US are ALL REIC funded and essentially mouthpieces for the industry. They have no academic credibility whatsoever, and are fast losing the bit of public credibility they claimed by virtue of affiliation with universities.
RE: these “real estate” centers located on campuses all over the US are ALL REIC funded and essentially mouthpieces for the industry.
They are merely public sector patronage employment way-stations for those who are politically connected.
I remember one time I needed some quick data for a foreclosure appraisal report and called the Center for Real Estate @ the University of Southern ME for some help.
Spoke directly to the high honcho runnin’ the show.
She indicated her department couldn’t afford the monthy fee to subscribe to the state’s MLS listing service and thus couldn’t access the numbers I was hoping to get.
Huh?
So, after hangin up I was thinkin’…just exactly WTF do these people do all day? No access to MLS data?
The service was like $300 per month.
Pathetic really.
“It will take more than 11 times the average annual income to afford a home,” Fuller says. “This will be a totally unaffordable region.”
And therefore the conclusion must be that no one will live there at that time, since it will be unaffordable?
GMU has some strengths but associating with the CRA is not one of them.
In 2005 I sold my townhouse in eastern Loudoun County (far suburb of DC). In the area at the time, the “single-wides” (1-car garage townhouses) sold from $425k (small, interior unit) to $535k (end unit, large, golfcourse lot). Today the realtor.com asking prices for single-wides range from $275k to $385k. That’s a 28% decline at the high end and a 35% decline at the low end. Asking prices are now at the Spring 2003 level. The peak was Spring 2005.
“History always repeats and brings us back to norms”
Word
“Samuel Moore was a D.C. renter when he started looking for a home in 2006. A real estate agent suggested a four-bedroom house in the Prince George’s town of Clinton, and he paid $283,000 for the house that November.”
“Within weeks, he said, the ceiling in the dining room caved in, pipes burst and the toilet in the main bathroom crumbled. After spending his entire savings on repairs, Moore said, he could no longer afford the house. ‘It turned into a money pit,’ he said.”
Prince George’s town of Clinton? WTF. We are talking one of the most dangerous places in the Nation where gangs and guns rule the streets and ppl are advised not to even drive though. Town my ass. I view it more of as a Hamlet or Village. Let’s call it like it is, a nightmarish slum.
I grew up in Clinton in the 1970s-early 1980s. It wasn’t a bad place to live at all, and the house we had was very well built. I know people that still live there and they aren’t reporting a war zone in the old ‘hood (the next neighborhood over was another issue).
Yes. Great access to Suitland and Anacostia. All my friends that lived around there were threatened with their lives, robbed and/or had their houses broken into on several occassions. I have lived in many cities. That’s not a normal part of life.
“‘Do you really need four new tires on that vehicle?’ Wunschel said. ‘Can you get by with two?’”
Sure, build me a ramp and I’ll drive around like Uni, Roy and Al used to do.
“Do you really need four new tires on that vehicle?” Wunschel said. “Can you get by with two?”
If this Wunschel guy had tires down to the tread bars on his own personal vehicle, would he only buy two new ones and simply try to “get by”? I seriously doubt it.
And when the town employee has an accident because of 2 bald tires how much is it going to cost the town in a lawsuit ?
Possibly a new line of work for appraisers?
I’ve heard a lot of this being tied back to people’s financial literacy. ‘No one ever was late on a mortgage payment in the fifties!’ and so on. That’s not entirely it. The great shame of all of this is that even responsible people who bought within their means using safe financing vehicles still had to compete in a market with the feckless, the willfully ignorant, and the greedy.
The only places that the responsible individuals could afford using rational principles of finance were those that, for one reason or another, wouldn’t be bought by anyone else.
That is the same arguement for use of steroids in sports ior doping in marathons. Everyone is doing it and it is not possible to compete if you don’t. It is absolutely true, but the only winning move is not to play the game… many of us saw what was going on and rented through it all, even though we could have done otherwise and ended up in deep trouble.
Erm. Yes, you are correct. I used the wrong word when I wrote “even responsible people who bought within their means using safe financing vehicles”. I don’t think it’s a stretch to say that it was irresponsible for almost anyone to buy almost any property in the past three years at going rates.
Speaking as someone who invested in the internet bubble after years of thinking it would pop, those voices of authority really do corrode your ability to make good decisions. When the President, the FRB chairman, the Treasury Secretary and the whole of the MSM are telling you that buying a house is the right thing to do and if you’re already priced out, buy like you’re not, it’s possible to lose your head. So, I’m not inclined to say that everyone who bought a house after 1997 was irresponsible or stupid; they were largely tricked by people they should have been able to trust.
“Those voices of authority” are the ones you should listen to carefully as a contrary indicator. They will ALWAYS harp whatever the masses want to hear. Run, do not walk, when any of these clowns start giving advice on personal finance.
“So, I’m not inclined to say that everyone who bought a house after 1997 was irresponsible or stupid; they were largely tricked by people they should have been able to trust.”
Anyone who bought a house they could not afford has three choices as the reason for their action: stupidity, laziness or greed.
Anyone who bought a house thinking they could sell later (for whatever reason - retirement, job relocation…) can blame: stupidity, laziness or greed.
Anyone stupid, lazy or greedy enough to listen to those in ‘authority’ or ‘experts’ deserves the reaming they get.
Do your own research, take responsibility for your own life, quit blaming others for your mistakes.
“Anyone stupid, lazy or greedy enough to listen to those in ‘authority’ or ‘experts’ deserves the reaming they get”.
Really? Do you really mean to equate reliance upon authority, per se, as “stupidity, laziness or greed”?
Very often, those who get the reaming in life are those who don’t listen to experts. Example: one my clients, a bright, educated senior computer professional, did a lot of reading on the Net during the 1990s about why our tax system is unconstitutional and illegal. He disregarded what any remotely competent tax lawyer would have told him to do, and ended up doing six months in jail and paying an enormous financial penalty, ruining his retirement security.
(PS: he first consulted me when he was already heading to jail) (PPS: he actually went to the prosecuting US Attorney and tried to lecture him on the tax system, based on his superior knowledge of the law gained from his intensive study on the Net of tax protestor Web sites! Ignorance, or at least arrogance, respects no intellectual boundaries).
If I have a heart-related problem, I am sure as heck going to rely on a cardiologist for advice. I’ll do some research on the side to see if this particular cardiologist has 43 malpractice suits pending, or attended the Medical School of the Central African Republic, but then I’ll weigh his advice very seriously. And, on matters of medical judgment, I will generally defer to him.
My point? Your statement is a vast over-simplification of a difficult issue. We all necessarily rely on “experts” in many parts of our lives. Sometimes, those experts are spot on, and other times they are full of it (e.g. Lereah, Greenspan).
I didn’t read Rionn’s comment as expressing self-pity, or a desire to excuse buyers from any responsibility. There is much to what he or she said that is true. Life is more complicated than simply telling “experts” to shove it and making complicated decisions completely on one’s own. One must make an informed decision about which experts to believe, make an independent review of the facts to see if what the expert tells you passes what we used to call the “straight face” test (i.e. where you can articulate it without breaking out into laughing) and then, to some extent, trust the advice you’ve been given. I don’t even remotely have enough time to become an expert in every field that touches my life.
With respect to the income tax law and tax protestors, it is more of a case of illegal, immoral, and unconstitutional laws being interpreted and enforced incorrectly than this guy being wrong (depending upon his argument).
Clarity of Command - The Prerequisite of Sound Law
However, just because you are “right” does not mean that you can ignore those with the guns. The experts can tell you how to avoid getting punished, but because they are the interpreters of the law they make good money off of the ignorance of the general public in the same way that real estate agents do. If they really knew what they were talking about (and didn’t have a vested interest in making money off of the tax laws) then they would tell you the truth, then tell you the reality.
“Example: one my clients, a bright, educated senior computer professional, did a lot of reading on the Net during the 1990s about why our tax system is unconstitutional and illegal. He disregarded what any remotely competent tax lawyer would have told him to do, and ended up doing six months in jail and paying an enormous financial penalty, ruining his retirement security.”
Again, stupidity, laziness, and/or greed. In this case - too lazy to do proper research and - I would bet money on it - too greedy to pay what he owes in taxes (for unless he rescinded any claims to federal benefits he does OWE federal income taxes and is simply a scam artist trying to STEAL).
I spent years reading tax, contract and case law before I stopped paying federal income taxes. I am now in possession of not one, but two letters from the IRS which both state in part “We apologize for any inconvenience we may have caused you. Please respond with a copy of this letter to any future correspondence you may receive regarding this account.”
Excellent analogy GH. We chose not to play the game.
Now Sam’s experience is some hilarious $hit. A huge percentage of those who bought had NO idea what they were buying, what documents they were signing in the nightmare it now is for them. People are friggin’ CLUELESS when it comes to looking at concrete, steel wood and mechanical…..and I mean clueless. It’s unbelievable how many were snowed and how easy it was to do it. What amazes me more is that Real-turds who can’t give the public reasonable market forecasts are same asshats buyers depend on to tell them what type a roof is on their listing. The ignorance of the real estate crime syndicate is mind blowing.
“In an effort to trim the deficit, the city administration has imposed a freeze on expenditures. In addition to property taxes that haven’t been paid because of foreclosures, the city is projecting a $125,000 drop in the amount of money it collects in real estate transfer taxes and a $200,000 drop in real estate recording fees.”
So much for the continued government hiring spree…
I’m had breakfast sitting next to a few contractors. They’re doing ok… but it was interesting listening to how picky they are on ‘hiring subs.’ They were also talking about ‘letting go’ less productive workers as they can now acquire higher quality replacements from failed competitors. The rest of their conversation was about protecting against the normal construction site theft and getting subs to fix deficient work. All four bragged about ‘taking more time for themselves.’ Hmmm…
Got popcorn?
Neil
You know, Neil, all the recent bluster by economists about a possible recession melts with stores like that. Contractors talking endgame strategies, taking ‘time off’ and scabbing others workers screams the early days of recession. Give this thing a few months and even a Yun could get it.
Just occured to me that the past year in the consulting engineering field has been just like that - every company has been throwing money at employees of competitors. A year later the slowdown occurs….
Two years ago when unemployment was low didn’t I read hear that unemployment always hits a low point immediately prior to the “dreaded R word?”
Yep.
I sold my house in PG County in the spring of 2005 and moved out into horse country. So glad to have sold when I did.
PG County is going to be the regional epicenter of the housing bubble collapse. The county, touted as the ‘most affluent majority black county in the US’, has been built upon the debt accumulated by it’s citizens in the never ending drive to have the most bling. The mortgage brokers working the county, pushing the ‘your black like me’ sales pitch, have been taking their own to the cleaners (the poor sob who bought my house paid over $20,000 in itemized mortgage broker commision).
There were atleast a dozen developments in my area going up advertising, ‘From the $700’s, no money down, $10000 back at closing’. All of those developments will crumble under mounting foreclosures.
Add to that that the school system is garbage and they had 163 murders in the county in 2007, and you see where it is heading.
I would expect foreclosure in PG county to rival anything in FL or CA in the next 2 years.
True. If all your bling is worth less than your liabilities it makes you more ignorant than affluent in my humble opinion. I grew up near there 25 years ago. Back then everyone was trying to run a con. Some things never change.
But they have so much going for them…just take a look
http://www.nationalharbor.com
http://www.konterra.com
BTW, did ppl read about the prisoner who escaped from Laurel hospital in PGC two days ago. That happened twice already in just 2 months.
I hope it’s government funded. I don’t see how private investors would not pull out given the current circumstances. I have a Minor in urban planning and am all for gentrification and urban renewal, I just found it rather odd that during the boom every dangerous area was going to be the next up and coming area. Unless real wealth and jobs are being created, all you can do is to shift the poor around from one area to the next. As one area benefits, another declines. I have not seen the flood of real wealth and job creation needed to turn our slums into shining jewels. I find it much more plausible that the fancy brochures and ads were just aimed at targeting marks looking to invest. Where are all the uneducated, drug addicted, felony committing and lazy going to live? They have to live somewhere unless we exterminate them. Do you think they will be banished to Georgetown, McLean, Betheda, Chevy Chase and Potomac, as the rich storm Prince Georges?
Note this was not directed at you qt, just the concept that everyone will be rich and happy in our brave new world.
No offense taken. I am too perplexed by the amount of “wealth” shown by residents. It seems like everyone own a McMansion or a Beamer (or two) except for me. BTW, I live on the border between PGC and MC, not in PGC though.
I know it simply as PG. It has always been an interesting place. All the beautiful beamers and mercedes were parked in front of the projects or shacks, and all of the Toyotas continued rolling into Calvert or Anne Arundel and parked in front of beautiful homes. Wealth and the perception of wealth are sometimes mutually exclusive.
Borrowing Costs Up for States facing 30billion in tax shortfalls…Fla, NY, Cali among them.That’s just this fiscal year.
Jan. 4 (Bloomberg) — From Sacramento and Albany to Boston and Tallahassee, politicians in state capitals across the U.S. are wrestling with the biggest increase in borrowing costs in three years as they struggle to shore up budget deficits widening on the national housing slump.
The extra yield investors require on 10-year bonds from California, Florida, Massachusetts and New York relative to benchmark tax-exempt rates doubled since July to the widest since at least 2004, according to data compiled by Bloomberg. California’s gap grew to 0.44 percentage point from 0.20 percentage point, adding $24 million in extra interest over 10 years for every $1 billion borrowed.
The cost to borrow for roads and schools is rising as property values drop and consumers cut spending, reducing sales- tax revenue that funds about one-third of state budgets. Thirteen states face cash shortfalls totaling $30 billion next fiscal year, the Center on Budget and Policy Priorities, a Washington research group, said in a Dec. 18 report.
“are wrestling with the biggest increase in borrowing costs in three years as they struggle to shore up budget deficits widening on the national housing slump.”
That’s just at the state level. Let’s start talking county and city levels here in CA then we’ll find out where the real hurt is!!
“From Sacramento and Albany to Boston and Tallahassee, politicians in state capitals across the U.S. are wrestling with the biggest increase in borrowing costs in three years as they struggle to shore up budget deficits widening on the national housing slump.
The extra yield investors require on 10-year bonds from California, Florida, Massachusetts and New York relative to benchmark tax-exempt rates doubled since July to the widest since at least 2004, according to data compiled by Bloomberg. California’s gap grew to 0.44 percentage point from 0.20 percentage point, adding $24 million in extra interest over 10 years for every $1 billion borrowed.”
http://www.syracuse.com/articles/news/index.ssf?/base/news-0/1199440670294120.xml&coll=1
and yet Albany floats a plan to eliminate expensive NY school taxes for home owners. Whiskey Tango Foxtrot?
“pricey neighborhoods like the South End”
I grew up in one of the Boston suburbs. I know it has been a long time since I lived in the area, but there is something so fundamentally wrong with this statement that my brain is about to explode.
“Tax revenues have plunged because banks that foreclose on delinquent borrowers don’t have to pay taxes on the foreclosed property until it is sold to another buyer, Finance Director Ronald L. Wunschel said in an interview.”
Is this just a Rhode Island law? Do banks in Florida pay property taxes on foreclosed homes? I’ve been trying to find the answer to this simple question for months, but can’t find any definitive answer.
Does anyone know the carrying costs banks occur in foreclosed properties?
“banks that foreclose on delinquent borrowers don’t have to pay taxes on the foreclosed property until it is sold to another buyer”
It’s the new buyer stepping up to the plate that will get those delinquent payments rolled into the house purchase.
I noticed this too. If the banks don’t have to pay tax, it makes even less incentive for them dump them. If this is true, Rhode Island is taking it in the shorts on this one twice over.
They still have to pay it, only it’s delayed until the sell, I believe. Remember, the longer they hold the more they owe.
This si going to be one of the biggest stories of 2008: Unpaid local property taxes crippling local and municipal government.
Most of the suicide loans did not require the maintenance of an escrow account. So Joe 6 Pack was left to try and save a few thousand for taxes when he could not even save enough for a down payment. Add to this what this article states, and deliquient property tax revenue could equal 10-30% of expected property tax revenue.
I guarantee that within the next 2 years the law will be changed to mandate that all mortgages have a tax escrow account. The government will ensure that atlast they get paid.
This si going to be one of the biggest stories of 2008: Unpaid local property taxes crippling local and municipal government.
And of course this means that folks who aren’t FBs and are living well within their means will be expected to pick up the slack!
That’s true for now, but someone has to pay the tax bill in order for the property to change hands. Eventually, once this mess gets settled, they will be paid. The question remains to how long it’s going to take for the market to return to “normal”. In the meantime, we’re all gonna end up having to pick up the slack.
Must be something strange in just RI.
The tax foreclosure list here is 23% bank-owned REOs. And the judicial approval of the foreclosure by the county goes through in a month or so.
I would bet it’s not a law, but a common practice.
RE taxes must be paid prior to or at time of each sale. When a bank forecloses and there are unpaid taxes, the bank must pay them current to take clean title to the property. Then, while holding the property, the bank typically will not pay taxes annually, will just wait until they sell it. The amount of unpaid taxes is collected at closing again and reduces the bank’s net proceeds. In my experiences, the bank never gets a free ride with regard to RE taxes, they just defer it as long as possible and that’s why the tax collections at the municipal level go down.
Carrying costs can include: RE taxes, HOA dues, utilities, maintenance, marketing costs. One-time costs might include mechanics’ liens, sales commissions, repairs, changing locks, winterization, etc.
It’s expensive to own REO properties, so most prudent banks will dump them as fast as possible. Plenty of bankers are still clinging to old appraised values and hoping to come out whole on properties - big mistake IMO.
I know a tax collector in NJ who told me the same thing. The interest rate is usually low (goes thru a bidding process) on tax sale properties, so it’s better for the bank to wait as long as they can. Builders do this, too.
Colorado has a process that makes some sense to me. Delinquent taxes are paid by investors who essentially purchase the municipality’s position. They normally are ensured of a 9-10% return on their money. The property owner then pays not only the tax, but the interest on the tax to the investor. The municipality gets their money on schedule rather than waiting.
Here they bid on the rate. In most cases the rate goes negative and the bidder actually pays to hold the lien.
“The ‘trend,’ however, was actually a market blip driven by the notion that land for development was disappearing rapidly, along with available housing, Dore said.”
Well, let me ask you……………..just who put those kinds of ideas in your head???
NAR perhaps? The “experts”. Weren’t they spouting out the “running out of land, rich baby-boomers, housing shortage?, new paradigm, “why the real estate boom won’t bust” - d.leareah., priced-out forever, etc, etc, etc.
and……….even now, the current downturn is just a little needed “breathing room” and will turn around very soon. The give us new quotes every month about how the market is due to recover in the next quarter or 2, so buy now, while prices and rates are “favorable”.
Once again, I say use the RICCO statues to disband this group of market cornering scumbags who helped facilitate the “boom” by taking houses off the market and re-pricing them. Then promoting the above mentioned ideas as to why new “fundamentals” were driving the market.
“Once again, I say use the RICCO statues to disband this group of market cornering scumbags who helped facilitate the “boom” by taking houses off the market and re-pricing them. Then promoting the above mentioned ideas as to why new “fundamentals” were driving the market.”
BULLSEYE. It was an ongoing crime syndicate on the way up and I’m sure the paper shredders are smoking now that it’s on the way down. Get these guys in front of congress, under oath and watch the saga unfold. This thing was waaaay too big for NAR dipshits to pull off.
If you are in danger of losing your homes, the housing was not ‘relatively affordable’! Augh, every day it hurts my brain more. Every day I think, there’s nothing new they can throw at me to upset me again… the stupidity has played out.
I was thinking the same thing. The guy who said this must have been on crack. Housing has been the LEAST affordable in the last few years. The last time housing was affordable was around 2000. Housing was greatly more relatively affordable in the 90s. Housing during the bulk of the 2000s will be looked back as the most unaffordable era in history.
Maryland is the land of the “Silent Bubble.” Houses are insanely unaffordable here ($400K starter condos, $600K houses, etc.), and people commute all the way from the mountains and from PA just to get work. It’s no different from the lunacy in CA with people commuting form the Inland Empire to work. Maryland real estate will be crushed, though few believe it for now…
Do you think that the crushing in MD will affect DC proper?
From figures I’ve seen, housing prices are falling more rapidly now in DC than in surrounding suburbs.
Interesting, Frank. Is this MRIS data? Haven’t seen the December numbers yet, but it looks like inventory is still pretty stubborn.
“Bill Dore, a Hampton Roads housing market analyst, said the run-up in home values between 2003 and 2006 led many to see what they wanted to see. ‘We got sloppy,’ he said. ‘We took those three years as a trend, instead of an aberration.’”
What do you mean we Mr. Dore, you got a frog in your pocket? How in the hell can this gent call himself a ‘housing market analyst’? If he was getting paid he should have to give the last three years salary back.
if you get a bunch of knumbskulls to run the show then you can easily manipulate them to do/say what you want. I said this before-if you knew what you were doing the past 5 years in the mortgage industry-you were the first one sent to the bench or out the door.
Don’t be so hard on the guy, cuz we need more like him. Look at what that statement represents:
1. A housing analyst admitting he made a mistake.
2. The past three years are an “aberration”, so forget about those days.
3. In the MSM!
I’m pretty happy to see this sort of turnaround, because we are finally putting “denial” into the rear view mirror.
The problem I have is that the media keeps giving an otherwise healthy return to normalcy a negative connotation. It is always referred to as a slump, a downturn or the like.
“Bill Dore, a Hampton Roads housing market analyst, said the run-up in home values between 2003 and 2006 led many to see what they wanted to see. ‘We got sloppy,’ he said. ‘We took those three years as a trend, instead of an aberration.’”
That’s not sloppy, that’s stupid. And for someone who calls himself a “housing bubble analyst”, it’s inexcusable.
Simple math will show you that a 15% annual increase isn’t sustainable. Simple logic will show that median price for housing can’t increase more than median family income over the long run.
In September 2005, Sean Kentch paid $538,000 for a five-bedroom, 3,800-square-foot brick home near the intersection of Mount Pleasant Road and Centerville Turnpike. Late last year, he learned he would soon be reassigned. This fall, he put the house up for sale, asking $579,000. He didn’t get a single offer.”
Hey Wilbur, do you those I can get someone to take a falling knife for me. I gotta recoup my cost and make enough to at least buy dinner at Denny’s.
I just love that he plans to rent out the house for 2/3 of the mortgage payment. So he will be losing a grand/month plus taxes, insurance and maintenance (maybe $1.5k/mo total) to hold onto a depreciating asset. And if he gets the wrong renters in this house, there will be some serious physical depreciation.
He’ll realize that he would have been better off losing, say, $50K all up front when selling the house, than losing 2K/month for several years.
Shhhhh. I like them renting for a loss until they burn through all their assets and then sell for an amount less then they could have received before they began renting. I don’t want any competition at the 2010 firesales.
Option 1: lose $50k today
Option 2: lose $2k/mo for two years, then sell for a $200k loss.
I’m more than happy to help out FB’s who select box number 2. I’ll rent their house for much less than their holding costs, then buy from them after prices have fallen 40% over the next couple of years.
I think the problem is he most likely does not have the $50k in the bank to bring to closing. So his choice is either walk away from the house or rent it out and make up the difference every month.
This reminds me of what I think the only government bail-out proposal for FBs should be:
Offer a low-interest loan, say at 5%, for the difference.
So if you need to sell your house and are 100K underwater, the gov will give you a loan for 100K, 15 years, at 5%.
This would be a much better idea than letting these folks get away with all their debt, and not even have to count their forgiven debt as income.
Of course, nobody ever listens to me.
I know there have been some great parties. Some of us are in smaller locations. Anyone interested in a HBB conference call? If so, post interest and I will set up a number. The conference call is free, only toll charges would apply for those that don’t have unlimited calling (calling number goes to Iowa).
Have there been, or are there any plans for a HBB party in the DC area?
I asked about it once, but no one bit. I know there are a lot of us.
I’d be willing to come to one.
Suggestions for a place?
Anyone else interested?
Capital City Brewing on Mass Ave?
That’s a good location. Downtown, next to a metro (Union Station) and nice and public so people can scram if any of us turns out to be stalker-freaks.
if any of us turns out to be stalker-freaks.
What gave me away?
OK, I shouldn’t even joke. So the next Q is when?
I’d be happy to meet you fellow freaks - I can’t stand that Cap City by Union Station (terrible service) - but I’d even bite that bullet.
i’m down for a dc/nova area meetup
My wife is already having a ‘girl’s night out’ drinking meet up on next Tuesday, so that day would be good for me. Also gives us a little time to prepare. Also, we can have fun watching the primary results come in… assuming we stay out that late. Seeing as it’d be a weekday, I imagine we wouldn’t.
Coincidentally, my wife goes off to her girls bible study on Tues. Hmmm. You don’t suppose she’s been scamming me and is out drinking with your wife?
Anyway, Tues works for me too. Somebody should put a mention in the bitbucket + eastcoast thread tomorrow to see if others can make it too. (I’ll do it if somebody doesn’t get to it first.)
I can’t revel in schadenfreude.
I know too many people who have made expensive mistakes
Count me in!
And, be forewarned, Tucsonans. The first HBB meetup of 2008 will happen in the next few weeks. Visitors from other locales are quite welcome to attend.
Tax revenues have plunged because banks that foreclose on delinquent borrowers don’t have to pay taxes on the foreclosed property until it is sold to another buyer, Finance Director Ronald L. Wunschel said in an interview
I see some cities in BIG DEEP $H!T if this is true all over the country. Manteca, Phoenix, Merced, Lost Wages, Reno, Miami, San Diego, etc.
Do you really need four new tires on that vehicle?’ Wunschel said. ‘Can you get by with two?’”
Driving with 2 tires might make for some interesting fireworks for a couple of hundred yards while sparks fly as metal is ground to nothing. Or, it is OK to drive on bald tires. Especially in snowy areas like RI. Of course, then a whole new area with extra emergency room visits for needless accidents and the city will get sued for negligence by some smart attorney who seizes on the deferred maintenance. All is not well in Caseyville, or Pawtucket, or Providence.
Speaking of car repairs, we took the truck in for an oil change. Service was dead. First time I’ve seen it this slow. Could just be Friday. Not sure. But we did see one thing we always see. We got the typical “$1,500 of extra repairs needed” BS. $90 to bleed the brakes. $600 to change the tires (they still have plenty of tread). I think the tactic is to show you all the repairs that need to be done so you’ll just buy another vehicle.
Sorry Charlie, just change the oil.
The real question that they should be asking is “Why do you need a city-owned vehicle?” since it is likely used just for driving back and forth to work.
When I was visiting MIL in Virginia Beach last weekend, I saw that article and nearly every sentence in there had me screaming a reply. The FB featured in the article is a naval officer, and from the picture that appeared in the print edition, he looks to be about 35 y.o. How exactly does anyone lower than an admiral afford a $500,000 house on that salary? Yes, he’s married and maybe she works too, but unless she’s a doc the wages in the civilian economy in Hampton Roads generally aren’t that high. Lots of retail, some tourism related stuff and well . . . Realtors (TM) and loan brokers. Why anyone in the military would want to buy a house anywhere before retirement baffles me since you’re not going to be in one place long enough to make it work.
The Ridgely Manor subdivision is right next to where MIL lives, so one day I took me a walk through said subdivision to see for myself what a bubble collapse looks like. Basically there are some oversized McMansions which look OK but not worth the > $1MM figure they sold for. There are a few houses in various stages of construction, but there didn’t seem to be a lot of ongoing activity. Granted the week between Christmas and New Years Day is generally slow in most industries, but the sites looked as though nothing or very little had been done for a while. Some lots are staked out, but have not been cleared, so who knows whether anything will get built. The activity at the apartment complex that I saw framed out in literally one day last summer also appears to have stopped. Another article a day or two earlier mentioned a condo tower project in downtown Norfolk that has stalled and a boatload of liens have been filed presumable by unpaid subs.
In short, the good times are over in Hampton Roads.
I thought the mantra was, “Wait until everybody comes back from the war and then the economy will take off.” BTW, I have a long-time client in Ghent (Norfolk) and his business was off a lot last year. Who knew dogfighting was propping up an otherwise moribund economy?
Ghent is perhaps the only neighborhood in that area where I would consider buying if I had to live in HR. That said, there are tons of for sale signs there and I suspect that there was a lot of flipper/specuvestor/condo mania behavior going on there during the past 5 years or so. Things will take years to sort themselves out there. The surrounding area isn’t too wonderful but if you work downtown and with gas heading to who knows where, living close in will give that neighborhood a boost.
The oft repeated “soldiers coming home will save us” line gets a little hard to believe since Oceana NAS is probably a goner in the next few years. The Navy is getting tired of all the morons who moved next to a military airport that is even larger than the civilian airport yet complain incessantly about jet noise. Once that shuts down, there goes a lot of the Va Bch economy. No, it won’t be their death knell, but it sure isn’t going to help the situation one bit.
“The surrounding area isn’t too wonderful” - LOL. That’s the understatement of the millenium - you need a bunker mentality to live in Ghent.
Before we lose Oceana, there is to be the relocation of a carrier from here to Jacksonville, FL later this year. Things will become very interesting when that happens.
All those empty lots that you saw? They are almost certainly still building, just not working for the holidays. Believe it or not, only a couple of high-profile condo towers have stopped progress around here. I have a number of these Chesapeake McMansion developments within a couple of miles of my office and they are still making progress, but they have slowed considerably.
I also noted recently in Ghent that there are a couple of new announcements for projects where some developer wants to rehab some of those old apt buildings, starting at $300,000. Good luck with that.
Hampton Roads and Jax are very similar demographically - navy, ports, big rail terminus and HQ to a big 4 railroad, most manufacturing based on the above; central city with big med and financial facilities surrounded by urban blight and then lots of rivers and bays and residential sprawl and then finally the beach scene.
All the new urban-luxury stuff thrown up in the last two years whether on the banks of the St. Johns near downtown, on the intracoastal, or at the beach is basically unoccupied. There is virtually nothing in the “just started” stage anywhere.
In my neck of the woods- DC Metro, there are of course, many military types. It is my understanding that many tend to buy and sell from one another and that they also have websites for facilitating the transactions. Heh, and all this time I thought they had a policy against screwing the guy you shared a foxhole with.
Just this past year my husband & I were looking into sound investments for some spare cash, and a Navy officer SIL recommended an outfit called First Command. The “broker” was trying to sell us term life annuities, and had an odd sales pitch, almost like a therapy session asking us about how we FELT about money. Then he went for the kill. We got suspicious and walked away, did some research and discovered that First Command was fined by the SEC for selling high cost front-end load investments to mostly military service personnel.
http://www.sec.gov/news/testimony/ts111705lr.htm
Annuities may make some sense for some folks — but, I think almost every situation where someone is actively peddling them is probably a poor proposition for the buyer, and a good one for the salesman/broker. My parent’s bank - Suntrust - tired to push a really inappropriate annuity on my octagenarian parents after they sold a long-held (and fairly profitable) investment condo in the summer of 2005 (they got pretty lucky on the timing - they were finally just tired of dealing with it at their age).
Active-duty personnel are also given a housing allowance that historically created RE micro-bubbles in housing near base.
Speaking of Hampton Roads…
I’ve owned a townhouse in Newport News (Carleton Falls, off Warwick Blvd, 20 min out of town) since 1999 (3/2.5, bought for $80k) and at the peak the “market value” reached $240k. Crazy. What did I do? I shaved off (refinanced) my interest rate by 4.5 points (fixed, 30 yr again, of course), and smiled peacefully.
Now, there is a listing on my street for $199k, although it’s been sitting for a while. Who knows what it will eventually sell for or if it will sell at all. Oddly, ziprealty doesn’t show listing date nor DOM for Norfolk/Virginia Beach area. It seems to be specific to this (and possibly other) areas since for the SF Bay Area they still list DOM.
But it doesn’t bother me one little bit that my unit has lost its fake value. My plan all along has been to pay it off early (I’ve been paying an additional $200 each month towards principal), have a mortgage burning party and continue to rent it to add to my retirement income. My gratification will come slower than the gotta-have-it-now-and-oops-I’m-losing-my-house folks, but I’m just fine waiting.
BayQT~
These guys were sloppy. They were greedy, as all the rest of the slimeballs that pushed this up. I had a 8 yr old figure out this wasn’t sustainable. But then, I think a lot of 8 yr olds are smarter than these dimwits.
O.T. is anybody here having problems with IE 7.0 and this site? I had to install firefox this week in order get back here. Thanks.
“I had to install firefox …”
ANOTHER thing to thank Ben and his blog for !!!! Your computer thanks him too.
“To prevent the reserve fund shrinking further, city officials are being extra careful about spending. ‘Every expenditure that comes across, we look at it and we challenge it,’ Wunschel said.”
You should have been doing that all along you worthless halfwit.
My grandfather was the purchaser for a small city in the south for about 40 yrs. When he died, I bet some city officials were actually relieved that they could start padding their expenses a little. My grandfather saved the residents of that city more money in taxes over the years than he ever took home in pay. And to him it was no big deal. He was just doing his job. Anything else would have been unthinkable.
Proving that some government employees are worth their weight in gold!
““‘It is definitely becoming a buyer’s market here. There are more houses on the market, fewer multiple bids and especially in the higher end of the market, where it generally starts,’ said Beth Carlson Ganem, an associate broker who specializes in higher-priced homes.”
Somewhere down the road we will uncover there were NOT legit offers made during the boom. We will uncover that a very few buyers were making bids on multiple properties thus exagararting the demand or we may see realtors creating phantom offers to drive bids higher. Either way I dont see that much legit demand out there.
This quote is from the Ithaca, NY article. For those of you who do not know the city, Ithica is bascially a college town located on the south end of the Finger Lakes. The nearest city is Syracuse, 1.5 hours away.
Ithica is home to 2 colleges (Cornell & Ithaca college, both private and both attract a large international student population). There are very few commercial jobs in the area. So most homeowners either work for one of the 2 universities, or are students themselves.
I suspect a lot of the new Ithaca home-owners are actually foreign graduate students.
On the bright side, the time frame for buying unimproved property on the cheap, then hiring unemployed craftsmen to build a proper house is moving up!